Last year, India surpassed Germany to become the third-biggest producer of wind and solar power in the world, according to Ember. In FY2024–25, the country added a record 25 GW of renewable energy capacity, marking a 35% increase from the 18.57 GW added the previous year. 

Despite these advancements in renewable energy though, coal continues to play a vital role in India’s energy mix, with coal-fired plants providing the majority of the country’s electricity. As such, the Indian government has maintained that coal will remain essential, forecasting its share of the energy mix to be at 55% by 2030 and still at 27% in 2047.

In the coal sector, India recently hit a milestone of 1bn tonnes of coal produced. According to a government press release, this achievement occurred on March 20 during FY2024–25, 11 days ahead of the previous year’s production of 997.83mn tonnes. The country’s total coal output reached 1.04bn tonnes (provisional), reflecting a 4.99% year-on-year increase. Additionally, production from commercial, captive, and other entities rose to 197.5mn tonnes (provisional), up 28.11% from 154.16mn tonnes the previous year.

Coal dispatch meanwhile also exceeded 1bn tonnes, with total dispatch reaching 1.025bn tonnes (provisional) in FY2024–25, up 5.34% from 973.01mn tonnes in FY2023–24. Dispatch from commercial, captive, and other entities surged even more, reaching 196.83mn tonnes (provisional), a 31.39% increase compared to 149.81mn tonnes the prior year. Coal dispatch refers to the transportation and distribution of coal to consumers, including power plants and industrial units.

Meanwhile, coal imports decreased by 8.4% to 183.42mn tonnes in the period from April to December 2024, compared to 200.19mn tonnes during the same period in FY2023–24, saving $5.43bn in foreign exchange, according to the government. Imports by the non-regulated sector dropped 12.01%, while imports for blending by thermal power plants fell by 29.8%, despite a 3.53% increase in coal-based power generation.

This reduction in imports is attributed to initiatives such as commercial coal mining and Mission Coking Coal, which helped boost domestic output by 6.11%, thereby reducing reliance on foreign coal. Despite this progress, shortages of coking and high-grade thermal coal continue to necessitate imports. To enhance energy security, the Ministry of Coal is working to ramp up domestic production.

Private sector power producers are also expanding their coal-based capacity. Tata Power, for example, is mulling its first coal power expansion in six years, aiming to boost production at a plant in northern India, news agency Reuters recently reported. The company’s last expansion in coal power was in 2019 when it acquired the Prayagraj Power Generation Company (PPGCL) through a joint venture. PPGCL is a 1,980 MW coal-fired plant in the state of Uttar Pradesh, and it has now applied for an environmental impact assessment to increase capacity by 1,600 MW, Reuters added.

Significant financial contribution

The financial contribution of the coal sector to India’s economy is significant. The sector accounted for 49% of total railway freight income, totalling INR822.75bn in FY2022–23, more than a third of total railway earnings. 

Additionally, coal production contributes over INR700bn annually to both central and state exchequers, supporting socio-economic development and infrastructure growth in coal-producing regions. In FY2022–23, royalties from coal production amounted to INR231.85bn.

The coal sector also plays a key role in infrastructure development. Over the past five years, annual capital expenditure in government-owned coal companies averaged INR182.55bn, driving resource optimisation and infrastructure growth.

Coal gasification

Coal gasification is another important focus area for the government. In January last year, INR85bn was allocated to support coal and lignite gasification projects within both state-owned and private sector companies. State-owned Coal India Limited has been authorised to form joint ventures with other public sector companies, such as BHEL and GAIL, to develop these gasification projects. 

To promote adoption of such, the government has introduced a 50% rebate in revenue share for commercial coal block auctions, provided that at least 10% of mined coal is allocated for gasification which converts coal into syngas for use in producing methanol, ammonium nitrate, synthetic natural gas (SNG), and fertilisers - a concept being promoted as a cleaner alternative to traditional coal use.